A wealthy hedge fund manager who used $113million of his clients' money to fund a life of luxury has been fined and banned from the finance industry for five years after agreeing to settle over the charges.

Phil Falcone was famous for rising from a humble background and dramatically falling from grace in the wake of the financial crisis.

His hedge fund, Harbinger Capital, once managed assets worth $26billion, although that has now fallen to a fraction of its former value.

Ban: Phil Falcone has been barred from the finance industry for five years and fined $11.5million

The five-year ban brings an end to Falcone's controversial career as an asset manager, although he is still able to run non-financial companies.

He is said to have borrowed clients' cash to pay for his estate on the Caribbean island of St Barts and a $10million renovation on one of his two Manhattan homes.

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The money allegedly kept the hockey team he owns in business and paid for the running of his private jet.

And some was also reportedly used to finance wife Lisa’s film production company Everest Entertainment, which made the 2010 Samuel L. Jackson movie Mother and Child.

The new settlement agreement comes after the SEC rejected an earlier proposal because it was too lenient, lacking any admission of wrongdoing or a full industry ban.

Phil Falcone, pictured with his wife Lisa Marie, left, is accused of illegally using $113million of his company's money to maintain his life of luxury

'Falcone and Harbinger engaged in
serious misconduct that harmed investors, and their admissions leave no
doubt that they violated the federal securities laws,' said Andrew
Ceresney of the SEC.

'Falcone
must now pay a heavy price for his misconduct by surrendering millions
of dollars and being barred from the hedge fund industry.'

The
51-year-old, who made a hugely successful bet against the subprime
mortgage market before racking up steep losses from a failed wireless
startup, said in a statement he was 'pleased' to reach a settlement.

'I believe putting these issues behind me now is the best course of action for me and our investors,' he said.

To
settle the charges, Falcone will have to admit to the SEC charges,
paying around $11.5million in fines, while Harbinger will pay $6.5
million.

New York home: Phil Falcone is said to have borrowed the cash to pay for his estate on the Caribbean island of St Barts and a $10million renovation on one of his two Manhattan homes

The charges mark the latest step in the downfall of one of Wall Street's most colorful investors who has been profiled in Vanity Fair and a string of business magazines.

Last year, He was named the 1,075th richest man in the world by Forbes magazine with a fortune of $1.1billion - but that was not enough to save him.

The SEC complaint states that in 2009 Falcone ‘fraudulently’ borrowed the $113million from a $2.4billion fund operated by Harbinger to pay his personal tax bill.

Ironically, the fund had banned anxious investors from taking their own cash out.

Falcone is said to have kept his actions quiet for months until June 2010 when it became overwhelmed by investor demands for their money back, and an SEC investigation was begun.

The complaint states that the same time Falcone ‘undertook significant personal expenditures’ including paying for his own personal security detail.

Left to right: Joshua David, Lisa Maria Falcone, Edward Norton, Robert Hammond and Philip Falcone attend the First Party on the High Line at High Line Park on June 15, 2009

There were ‘extensive’ renovations on his $49 million Upper East Side townhouse he had bought from former Penthouse publisher Bob Giuccione.

He also had to maintain his $10million townhouse a few blocks away complete with Vietnamese potbellied pig which had been bought one Halloween as a present to his twin girls.

The SEC however claims that it was not until it began investigating that Falcone finally got his financial affairs in order - and by then he had allegedly broken the law.

Falcone, a father-of-two, was the son of a utility superintendent who came from a working class family in Chisholm, Minnesota, before he began his rise to riches.

He was educated at Harvard and was a Varsity hockey player before entering finance and earning $1.7billion betting against sub-prime mortgages in 2007.

Splurge: Falcone is said to have borrowed the cash to pay for his estate on the Caribbean island of St Barts and a $10million renovation on one of his two Manhattan homes

With the money he and his socialite wife Lisa Marie splashed out and lived a life few could dream of.

He spent millions to become the minority owner of his beloved Minnesota Wild hockey team while she devoted herself to becoming a member of society New York and became famous for her designer clothes and penchant for Christian Louboutin heels.

She became a board member of the New York City Ballet and paid $50,000 for a seat at the American Friends of Versailles Tour in 2007.

In 2009 however, Lisa Marie put noses out of joint by storming on stage during the gala for the High Line park in which she seized the microphone and gave an impromptu announcement that she and Falcone would be giving $10million on top of the $1.4million they had pledged already.

Falcone’s luck started to run out when his $3billion wireless network company LightSquared went into bankruptcy because regulators ruled it could not go forward as it would mess up GPS navigation systems.